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Reading between the borders: VAT, customs and Brexit

The Taxation (Cross-Border Trade) Bill 2017-19 has had its second reading in the House of Commons this week. VAT and excise take a prominent role: in particular, removing acquisition tax and replacing it with import tax.

The Treasury Select Committee has highlighted the cash flow issue for businesses. Acquisition tax does not get declared and paid until the end of a VAT period, whereas import tax is due at the time the good is imported into the UK. Effectively, this change will cause businesses to pay VAT up front for goods to cross the border into the UK from EU member states, instead of paying VAT later.

The Bill also contains provisions to allow ministers to change VAT legislation under the controversial so-called “Henry VIII powers”. This means that statutory instruments can be used to alter existing EU-derived UK law after Brexit day, subject to any trade agreement.

Like the European Union (Withdrawal) Bill, which serves as the key plank of Brexit legislation, we expect the Taxation (Cross-Border Trade) Bill to be scrutinised line by line and to have hundreds of amendments attached. All this is likely to result in further conflict between those with strong, differing ideas about Brexit. But with 29 March 2019 fast approaching, and a trade deal with the EU far from completed, we may see drastic changes in this Bill between now and its royal assent.

Whatever happens, 2019 promises to be a significant year for the administration of VAT. If you have any queries about how your business may be affected, our specialists can help to simplify the complexities of VAT: please get in touch using our enquiry form.